The Longer Term Effects of the Ian King Letter

No-One Likes A Harsh Awakening

Defence Analysis Vol 13 No 12 (December 2010)

01/02/2011 – The Chairman of the House of Commons Treasury Select Committee expressed outrage at having “a gun held to the head” by BAES over the naval shipbuilding/support Terms of Business Agreement (ToBA) which includes the contract to build two aircraft carriers.

This outburst came in the wake of the publication of BAES’s CEO Ian King’s letter to the Prime Minister, David Cameron, stating the implications of cancellation of the second carrier. That BAES should be getting the flak in the way that it is, after the letter – headed “In Strict Confidence” – was put up on the Treasury website, seems a bit strange.

And all Defence Analysis can say is that it is tautly written, far from inflammatory, and a model of restraint. It simply aims to inform a Prime Minister who was evidently not being well-informed or advised by his immediate circle, or even a wider set of sources, of the actual consequences of an act, in this case the cancellation of one or both aircraft carriers.

What seems to be pretty apparent is that Mr. King’s simple missive shows quite what a harsh awakening the coalition government is getting when it comes to defense, and it also points to the growing fear of “train wrecks” down the line as the Strategic Defence & Security Review is “implemented”.

Defence Analysis will come to the single most important element of the letter, in our opinion, in due course. But there is a requirement for a few general observations about the letter.

First is the one part of the letter that could be seen as chiding the PM. This is in the opening paragraph when Mr. King says: “I have written to you on two separate occasions during the course of the Strategic Defence and Security Review …. I wanted to make sure that you and NSC colleagues understood what this would mean in practice, before you make your final decision.”

Note well Mr. King’s reference to having written twice before: the context might seem to be, “and you don’t seem to have listened to what I said in the previous letters”. It is also highly suggestive that “consultation” with industry over the course of SDSR was minimal, probably deliberately. And there would seem to be a major dig at the NSC’s capabilities, made plain by the direct reference to that body – Mr. King seems to be suggesting that the NSC simply does not have the corporate experience or knowledge to be making a whole raft of SDSR decisions. But these 69 words are the only ones in the letter that might be regarded as “risky”, as they are implied criticism of the SDSR process and some of the figures involved.

And so to the most important part of the letter. It will possibly have missed many people’s attention, as the main sources of interest will have been the simple cash figures. But the first paragraph on page 2 is the one with the most impact, not just in the course of the carrier debate, but as a wider observation about the defence industry-MoD relationship:

“It might be possible to ameliorate this position through a direct award of new work to BAE Systems. With fuel tankers, an ice capable ship, and the acceleration of the frigate program, it would be just about possible to sustain the Key Industrial Capabilities set out in the BAE Systems agreement with the MoD. But the speed at which these decisions would have to be made in order for us to be in a position to cut steel of any sort by 2013 has never been achieved in defense acquisition before on a program of this sort ….”

This is a damning indictment: despite the pressures of the current situation, Mr King is saying that the MoD, as well as the Treasury, are simply not up to the job of moving at speed. In effect, they are not fit for purpose. Even if it were to be deemed to be the single most important thing facing the MoD, everything else pushed to one side, the department would be unable to come to a decision.

And do note that Mr King doesn’t say that there isn’t time, say, to actually design a ship, or several ship classes: he is specifically stating that the MoD (and Treasury, by implication) cannot take decisions of sufficient robustness at speed.

Defence Analysis thought that the Gray Report was pretty damning about the MoD and how it operates – or doesn’t. But this letter, coming from someone who has worked inside the UK defense business for several decades, is saying that the department is simply so dysfunctional that it cannot operate on anything resembling a sensible pace.

Just think about this: armed forces, and those within them, are meant to be able to cope with incredibly stressful, dynamic situations, making decisions based on what their over-loaded senses are able to discern. And yet take them out of the trench, and put them in a Main Building office, or one at Abbeywood, and they lose most of those skills that they have been trained in. For a department that is, in theory, meant to cope with speed, it turns out that it has no sense of urgency.

It is now up to the MoD to show Mr King that it is not quite as broken and spavined as he states that it is. If the department believes that what Mr King states in his letter is factually incorrect, then it is going to have to produce concrete proof of why he is wrong. For sure, Defence Analysis knows that a refutation of Mr King’s beliefs will point out the Urgent Operational Requirements system as a shining beacon of rapid delivery.

However, the UOR system is not as brilliant as has been made out, and issues such as supportability and integration have proved to be problematic. A really key signpost about the UOR system is going to be how much of the UOR equipment gets retained after the end of major combat operations in Afghanistan, or at least how much the

Services actually want to keep ….

Actually, the UOR system is to a greater or lesser extent irrelevant: the main procurement and requirements systems are still incredibly tortured and slow, regardless of what has been done in support of operations. If the UOR system was so applicable across the piece, then surely by now it would have been rolled out to cover the larger ticket procurement programs, to inject some pace into them?

But there are signs that it isn’t quite as copy-able as might have been the case.

So, if the Secretary of State, Dr Liam Fox, were to be reading Ian King’s letter – or even the Prime Minister, David Cameron – he should be wondering why Mr. King has quite so little confidence in the capabilities of the MoD to move rapidly, effectively, and decisively. What evidence does Mr. King, by nature a cautious person who measures his words and deeds, have to back up his assertion and pessimism? And in which case, if he has this data and evidence, is it backed up by other parts of industry? And if it is, then what on earth can be done, and at what best speed, to rectify what would seem to be a pretty horrendous state of affairs?

What Mr. King is putting forward is a firm statement that the MoD machine is so broken when it comes to so many aspects of procurement and requirements that urgent action needs to be taken if anything concrete is to be achieved.

Which raises the question: bearing in mind the default appointment of Ursula Brennan as the new PUS, and the almost certain appointment to the CDM post of Andrew Manley, the former Commercial Director, how far is the new civil service team orientated towards deep reform? Is this potentially another problem that will blow up in the SecState’s face, and possibly even the coalition’s?